EUR/USD Price Forecast: Pair Defends 1.18 Support With 1.20 Back in Sight

EUR/USD Price Holds Above 1.18 As DXY Softens And CPI Risk Builds

Current EUR/USD Trading Zone: 1.1780–1.1830 After Rejection Near 1.20

EUR/USD is stabilizing after a sharp run that pushed the pair to its highest level since June 2021 near 1.2000 last week. The pullback found support in the 1.1780–1.1775 band, where dip-buyers stepped in, and spot is now rotating around 1.1815–1.1830 in early European and Asian trade. That zone has become the immediate equilibrium: below the recent peak at 1.2000 but comfortably above the latest swing low around 1.1780. Price action is tight because desks are waiting for two catalysts on the same day – Eurozone flash HICP at 1.7% consensus versus 1.9% prior, and US data (ADP employment plus ISM Services) that can shift the dollar leg of EUR/USD very quickly.

Macro Setup For EUR/USD: Euro HICP At 1.7% While Fed Is Still Seen Cutting Twice

The macro backdrop is a tug-of-war that keeps EUR/USD supported but capped. On the Euro side, January’s flash HICP is expected to slow to 1.7% YoY from 1.9%, with core inflation projected to hold at 2.3% YoY. That combination – headline easing, core still above 2% – fits the European Central Bank’s narrative of a temporary dip without justification for an immediate aggressive move. The ECB is signaling patience going into Thursday’s meeting, and markets treat this as a central bank that will move later and more cautiously than the Fed. On the US side, the rate path is clearly softer. The market is still priced for around two additional Fed cuts in 2026 despite Donald Trump’s nomination of Kevin Warsh – perceived as relatively hawkish – as the next Fed chair. Fed voices reinforce the easing bias: Stephen Miran has floated the idea that policy should be lowered by roughly 100 bps this year even with inflation not posing an acute threat, and Thomas Barkin accepts that inflation is above the 2% target but still talks about further progress rather than fresh tightening. That combination keeps the US policy outlook softer than the euro area and lends a medium-term tailwind to EUR/USD, even if short-term flows still respond to safe-haven demand for the USD.

Risk Tone, DXY Around 97.30 And What It Means For EUR/USD

The broad dollar backdrop is defined by a DXY that failed to extend its latest rebound. After bouncing from roughly 95.55, the index is hovering around 97.30, slightly lower after two days of gains. The technical structure is heavy: a descending trendline from the January highs intersects the 200-EMA in the 97.60–97.70 area, which is acting as a hard cap on the upside. Below price, the 50% Fibonacci retracement at 97.22 and the 38.2% level around 96.83 are the key cushions. As long as DXY trades beneath 97.80 and struggles to break that EMA/trendline cluster, the dollar’s upside looks limited and that supports a constructive bias for EUR/USD above 1.18. A clean push through 97.80 on DXY would change that calculus quickly, opening 98.25 and putting real pressure on the pair; but current price action – short-bodied candles and hesitant follow-through – still points to a capped dollar rather than a new up-leg.

Technical Structure Of EUR/USD: 200-Day Base At 1.178 And Upside Map Toward 1.20

Technically, EUR/USD remains in a constructive trend despite the pullback from 1.2000. On the higher-timeframe view, spot holds above the 200-day SMA and the 200-EMA clustered near 1.1780, which has turned into the key structural floor. From mid-January, the pair has been respecting a rising trendline that starts in the 1.16s and now runs just below 1.1780–1.1800; every trip into that zone draws demand. On the shorter-term 2-hour chart, the 50-EMA is sitting around 1.1860–1.1870 and acting as immediate resistance. That leaves EUR/USD boxed between roughly 1.1780 (trendline plus 200-EMA support) and 1.1860–1.1900 (short-term moving average and horizontal supply) as markets digest the rally from sub-1.17. Momentum indicators back a pause, not a reversal. RSI has cooled back toward the 50–55 band after overbought readings near 1.20, signaling that the overextension has been worked off without a full trend break. As long as the pair holds over 1.1780 on daily closes, the move still looks like a normal correction inside an uptrend, with 1.1900 and then the 1.2000 handle as the upside reference points. A sustained drop through 1.1780 would damage that structure and refocus attention on 1.1700 as the next downside objective.

Event Risk Cluster For EUR/USD: Eurozone CPI, US ADP And ISM Services

The next leg for EUR/USD hinges on a dense data block. At 10:00 CET the market gets Eurozone flash HICP, with headline expected at 1.7% and core at 2.3%. A print above 1.7% on headline or any upside surprise on core would push pricing away from near-term ECB easing and is likely to support the euro, especially with the ECB meeting just one day away. A softer-than-expected 1.7% or a slip in the core gauge would nudge the market toward earlier cuts and could push the pair back into the 1.1780–1.1800 support band. Later in the US session, the ADP National Employment Report and ISM Services PMI come into play. With the official jobs report delayed by the recent government shutdown, the ADP release at 8:15 ET takes on extra importance as a proxy for labor demand. A strong ADP and firm ISM Services would temporarily re-energize the dollar and test EUR/USD support, particularly while risk sentiment remains fragile. Conversely, weak jobs or a softer services print would reinforce the story of a Fed still on track for multiple cuts and should favor another push higher in the pair toward 1.1900 and beyond.

Sentiment Around EUR/USD: ECB Patience Versus The “Warsh Trade”

Positioning in EUR/USD is being shaped by the so-called “Warsh trade.” The nomination of Kevin Warsh, viewed as more orthodox and less tolerant of sustained balance-sheet expansion, initially put a bid under the dollar and triggered some profit-taking in the pair. That reaction has faded as markets refocused on the underlying message from Fed officials: the baseline still includes more easing in 2026, not a return to tightening. At the same time, the ECB is signaling that the current dip in headline inflation to around 1.7% YoY is a temporary deviation; core holding at 2.3% gives Frankfurt cover to delay cuts. That divergence – a Fed with two more cuts penciled in against an ECB that can justify taking longer to move – is exactly the kind of macro mix that historically supports EUR/USD on a multi-month horizon, even if short-term swings around 1.18–1.20 stay violent. The key risk for that narrative is a data sequence that forces the ECB to turn more dovish quickly, for example a string of sub-1.7% HICP prints or clear deterioration in euro-area growth indicators.

Key Levels And Tactical Playbook On EUR/USD

From a pure price-level perspective, EUR/USD is trading in a well-defined ladder:

• Immediate support: 1.1780–1.1800 (recent low cluster, 200-day region, rising trendline)

• First resistance: 1.1860–1.1900 (short-term 50-EMA area and recent intraday highs)

• Major upside line: 1.2000 psychological level and recent cycle peak

• Deeper downside line: 1.1700 zone if 1.1780 fails on a closing basis
  Within that map, dips closer to 1.1780 ahead of data are being used to re-establish long EUR/USD exposure with an eye back toward 1.1900 and then 1.2000, while breaks above 1.1900 tend to squeeze shorts that bet on a deeper correction from last week’s highs. If the pair decisively loses the 1.1780–1.1800 shelf and the 200-day gives way, the structure flips: the move would signal that the post-January rally has exhausted and opens space for a broader retracement toward 1.1700 and potentially the mid-1.16s if DXY also breaks above 97.80.

Bias On EUR/USD: Tilted To Buy Dips While Above 1.1780, With 1.20 Back In Sight

Putting the macro, dollar backdrop and technicals together, the balance of evidence still leans mildly bullish EUR/USD. The pair trades above its 200-day base near 1.1780, rides a rising trendline from mid-January, and sits in front of an ECB that is less eager to ease than a Fed already priced for two further cuts. DXY stalling around 97.30 under a descending trendline at 97.60–97.70 reinforces that the dollar’s upside is constrained unless US data come in materially stronger than expected. As long as EUR/USD defends the 1.1780–1.1800 region on closing prices, the structure favors a “buy-on-weakness” stance with a medium-term target retest of 1.1900 and the 1.2000 high. A daily close below 1.1780 would invalidate that view and shift the stance to neutral-to-negative, with 1.1700 as the first downside objective. Under current conditions – Eurozone HICP projected at 1.7%, core at 2.3%, Fed still on course for additional easing, and DXY capped – the pair is better characterized as a Buy on dips above 1.1780 with upside potential back toward 1.20, rather than a Sell, while outright conviction only breaks if the 1.1780 floor fails.

That's TradingNEWS